The number of open-ended and exchange-traded funds with climate-related mandates has risen from fewer than 200 in 2018 to more than 1,400 as of June 2023, according to research from data and analytics provider Morningstar. It also found that in the last 18 months, the assets in these funds have surged 30% to US$534 billion. Europe is the largest and most diverse climate funds market, accounting for 84% of global assets, the research found. China and the US rank second and third, with 8% and 6% market share, respectively. Other key findings in the research were that climate transition funds account for almost half of all climate fund assets in Europe, while climate solutions and clean energy/tech funds dominate the landscape outside of Europe. Hortense Bioy, Global Director of Sustainability Research at Morningstar, said: “The growth of climate-related funds over the past five years is simply remarkable and reflects the growing awareness of investments risks and opportunities arising from climate change. Our analysis of these funds reveals a gloomy reality, though. None are aligned with the goal of limiting global warming to 1.5°C. We’re not saying climate funds are greenwashing. The fact is that they’re investing in a tiny pool of companies and countries on track or close to being on track to achieve net zero emissions by 2050.”
